The Next Wave of Energy Enterprises: Innovation through Business Evolution

By Acumen on November 22, 2017

We recently asked a group of off-grid energy experts, including our entrepreneurs and other industry leaders, where they are seeing truly new, groundbreaking innovations in sales, distribution and financing? While we were hoping for an example of true invention, what we’ve learned is that the frontiers of innovation in off-grid energy are currently found in business evolution, segmentation and specialization.

Over the last 10 years, pioneering companies, such as d.light and M-Kopa, had to develop do-it-all business models that stretched across the entire value chain, from product development to end-user financing. As the sector has developed and new companies emerge, we are seeing more specialized businesses mastering specific segments of the value chain. With their arrival, pioneers are now being forced to focus on their strengths rather than the entire value chain and instead join forces with these new, more specialized companies to better serve their entire customer base.

This sea change has collective benefits for the sector, pushing more companies to become leaner, targeted specialists that deliver a differentiated product or service. This shift is being driven not only by a more competitive and diverse market, but also by discerning investment capital rewarding companies that take advantage of market efficiencies. Even early pioneers are raising new money based on their specialization in key parts of the value chain.

As companies narrow their focus and streamline their business models, we’re seeing a real opportunity for innovation emerge from this focus. Distribution companies are leveraging technology and analytics to optimize sales and marketing strategies that are fine-tuned to specific contexts and customer demographics. For example, Azimuth, a company operating out of West Africa, leverages its analytics platform to manage and optimize the remote activities of their sales agents to create a unique experience for its customers and build long-term, trusted relationships with them. Product companies are tailoring products and platforms for partners with specific contextual needs. For example, our investee, BioLite, has partnered with One Acre Fund to develop a solar home system for its distribution channel. In this way, BioLite is focusing on product development and One Acre Fund is expertly leveraging its smallholder farmer distribution and financing channel. We’re also seeing companies apply technology to drive specialization and differentiation, and focus on operational innovation in each context.

This evolution toward specialization is driving the need for strong, mutually beneficial strategic partnerships. Even on the financing side, deal syndication is growing, once again driving the need for strong partnership. From investors to entrepreneurs, the sector is beginning to realize that one company cannot do it all. Working together, they can stitch together a value chain that will best serve customers across the board. As these partnerships mature, we hope to see the best products, with the best financing and platforms, through the most optimized customer service outfit, fine-tuned for each specific context and customer demographic. As further sector progression occurs, partnerships will be critical to a company’s success as well as the sector as a whole.